Japan's Economic Output Shrinks as Exports Suffer by American Tariffs
Japan's economy has experienced a decline for the first time in a year and a half, primarily driven by declining overseas shipments as a result of recent US trade duties.
G7 Growth Leaderboard
Japan stands as the first Group of Seven nation to disclose an GDP decline in the latest three-month period.
As the US yet to release its GDP data for the third quarter, the present G7 growth standings display:
- The French economy: 0.5 percent quarterly growth
- United Kingdom: +0.1%
- Canadian economy: +0.1% (preliminary figure)
- Germany: 0%
- Italy: 0%
- Japan: negative 0.4 percent
Tourism Shares Decline amid Diplomatic Dispute with Beijing
In addition to the economic contraction, Japan is experiencing an intensifying political conflict with China regarding Taiwan.
Shares in Japanese tourism and retail firms have dropped sharply after China advised its residents to refrain from visiting to Japan.
This action by Chinese authorities intensified a political dispute that was initiated by statements from Japan's new prime minister about the possibility of sending troops in the event of a hypothetical Chinese attack on Taiwan.
The situation led to a surge of selling across Japanese tourism-related shares.
- The Tokyo Disneyland operator stock fell by 5.7%
- The department store chain plummeted by 11.3%
- Japan Airlines fell by 3.75 percent
"The China-Japan tension over Taiwan and China's advisory discouraging visits to Japan introduces short-term challenges for consumer-facing sectors.
"Chinese visitors account for roughly 25% of Japan's inbound traffic, making department stores, high-end shopping, and hospitality particularly at risk."
GDP Contraction Details
Japanese GDP fell by 0.4% in the July-September quarter, as manufacturers' exports were impacted by duties levied by the US recently.
Exports were a primary factor of the contraction, falling by 1.2 percent compared with the previous quarter, and were 4.5% lower than a the same period last year.
Previously, the American government had proposed Japan with a new 25 percent tariff on its goods, which was later lowered to 15% when the two nations concluded a trade deal.
Consumer spending also fell, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's GDP shrank by 1.8% in the three months through September.
"Japan's economy was strong in the initial six months of this year and the latest GDP figures showed that growth is halted temporarily.
I anticipate Japan's economy to be back on a gradual growth trend going forward."
The US administration has lately recognized the impact of tariffs on Americans, reducing duties on food imports including beef, tomatoes, beverages and fruits amid growing concerns about rising costs.
Economic Agenda
- 08:00 Greenwich Mean Time: Switzerland GDP report for Q3
- 3pm GMT: US construction spending data for August
